This Tourism Week 10 November 2009

Brought to you by Buffalo Hills - now offering diner, bed and breakfast at just R950.00 pppn (a price that includes guided game drive, game walk, Nyati jjj Mampoer Distillery Tour and Mampoer tasting, and agent’s commission).

Price Gouging: Your Money Or Your Future?

Correct me if I’m wrong, but this is the way you decide on your room rate: you take your direct costs (laundry, amenities, meals), add the cost of buying your expensive property to the cost of developing your rooms and the cost of borrowings, multiply by the number of rooms you have, and by the expected life of the business, and divide by the number of bed nights you expect to sell during that time, add a fair profit for yourself (and an unfair profit for the tax man) - and viola! that’s your base rate.

Then all you need to do is put your prices up or down according to the basics of yield management, and if your town or your region are empty, you charge less, and if they’re full, you charge more.

Or something like that.

So how does the idea of price gouging come about? Is there any real difference between yield management and price gouging? And how does a homeowner, who’s putting his place up for rent for one month during a big event (the World Cup, for instance?) determine his rates?

And, of course, whenever I think about something these days, the first thing I do is Google it.

My search began with a story from Bnet about two Texan hotels who were accused of price gouging for doubling their rates during Hurricane Ike, which forced residents of coastal areas to flee inland.

Not a great example - because that’s not price gouging; it’s inhuman (although the writer did say: “If the government is going to require reasonably-priced hotels during a natural disaster, why not give them a financial incentive rather than expecting them to take it on the chin for the good of the community?” And how American is that? I remember that, during the floods of ’96, many of the guest houses and hotels in Wilderness in the Garden Route took caravanners and campers in for free).

Then I went to the BBC - my favourite news feed - and found this article: SA World Cup rail project delayed which gave me a REAL example of price gouging - contractors asking for an extra $180 million (dollars mind you, not Rands) to have the Gautrain ready in time for kick-off. If they didn’t get it, they said, the train would only start running two weeks into the event (to which our good Government promptly told them where to get off).

But that article also carried this warning: “In another development, a World Cup organiser has hit out at spiralling accommodation prices for the event.

“Organising committee boss Danny Jordaan said inflated prices could damage South Africa’s prospects of enticing tourists back after the tournament.

“Mr Jordaan told Reuters news agency he was concerned to hear that some owners of hotels and private homes have inflated prices by up to six times during the past few months.”

We should not, he said “look at the World Cup as a once-off, but see tourism over a period of time creating a stable and predictable basis. Otherwise you will get a huge influx of tourists into the country and they won’t return. Unfortunately this is one of the things that has emerged around major events.” (And how South African is that?)

And then I found this very sober and considered article by Donald Holacek of the Michigan State University: Pricing Tourism Products & Services.

But Mr. Holacek ends with these words: “One point remains to be made. Regardless of how much you read about pricing, both in theory and in practice, and how much research you undertake to support your decisions, it is necessary to monitor the results of your pricing decisions. Only through monitoring can you determine whether your pricing decisions are yielding the anticipated results. It is far better to adjust your strategy than it is to stick with a bad decision. Even good business people occasionally make bad decisions because of faulty information or incorrect analysis. The only way to determine what price to charge is to experiment.”

… And that lead me back to my own conviction that pricing in tourism is about nothing more than perceptions - because if we create the perception that something is expensive, it will be. And there’s nothing wrong with that because there will always be those who want expensive things, just as much as there will always be those who want the cheapies.

So if South Africa wants to project itself as an expensive destination, that’s OK - but the perceptions that it generates must underpin that positioning. And this means we need to protect our visitors and provide them with the top-drawer value-for-money they deserve from an expensive destination.

My fear though, is that, with our crime, poverty and appalling service delivery, we can’t.

And THAT’S what really opens us up to being accused of price gouging.

Buffalo Hills - An African Adventure On the Garden Route

Here’s a special that every tour operator will want to know about.

Besides excellent value for money, Buffalo Hills, near Plettenberg Bay, offers a fantastic experience of South African bush hospitality combined with a unique tour of the Reserve’s very own Nyati jjj Mampoer Distillery for just R950.00 pp (a price that also includes guided game drive, game walk, diner, bed and breakfast, and agent’s commission).

The Reserve has hundreds of plains animals but none of the dangerous ones - so your guests will also be free to enjoy un-guided trail running and mountain biking on established routes (although bikes are not provided - but, given sufficient notice, hire can be arranged through an outside contractor). Guided mountain bike tours (with Mountain Biking Africa),  overnight luxury hiking trails and day visitor facilities are also available.

And the birding, of course, is superb - with dozens of forest, grassland, and open woodland species.

Importantly, kids are genuinely welcome at Buffalo Hills, which owners Tony and Maria Kinahan set up “so that future generations - and especially our grandchildren and their grandchildren - will know something about the magnificence of the African bush.”

See my video interview with cooked Tony Cook and raw Jacques Marais here - or contact Tony Kinahan directly for more information on telephone +27(0)44 535 9739 or e-mail buffalohills@mweb.co.za.

Now go away on holiday - it’s in the economy’s best interest.

And have a GREAT Tourism Week